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eBay is continuing to advance advertising, as the fast growth of promoted listings is helping to boost revenue.
The marketplace offers the latest evidence that retail media is growing rapidly as advertisers seek new avenues to reach consumers directly within platforms in the fallout from privacy-oriented changes that impacted performance marketing on social media platforms. Increasingly, the platforms where products are sold that are also the recipients of advertising spend, as they harness first-party data to reach shoppers while they are in the act of buying.
In the first quarter of 2023, eBay’s advertising results showed the following:
Overall advertising revenue was up 23% year-over-year to $317 million.
First-party advertising revenue, driven by promoted listings, grew 31% to to $285 million.
Over 2 million sellers adopted single ad products, while live promoted listings grew to 750 million.
Advertising accounts for 1.7% of gross merchandise volume (GMV), and outpaced volume by 33 percentage points. It was the third straight quarter that advertising outpaced volume.“
We continue to think we have a long runway ahead of us for advertising,” eBay CEO Jamie Iannone told analysts on Wednesday.
Here’s a look at the latest updates on advertising from eBay:
eBay’s cost per action (CPA) product remains the largest contributor to advertising growth, Iannone said. In the first quarter, the company rolled out a new machine learning model for ranking these ads.
“This ranking model also enables us to evaluate the expected performance of multiple ad products alongside each other rather than making ad-serving decisions in silos,” Iannone said. “This change will be beneficial as we continue to expand our multiproduct advertising portfolio.”
Ads that elevate listings to highly visible locations within the marketplace and search results are gaining momentum on eBay. These grew in the “mid-single-digits” over the quarter, Iannone said.
This was led by the more recently launched Promoted Listings Advanced, which is a cost per click (CPC) ad product. Along with being woven into more ad services, this format also saw a new quick setup tool, and received an upgrade to the relevance model during the quarter.
“That helped us present higher quality impressions and more GMV for the same number of impressions on the site,” Iannone said of the relevance model. “We also expanded CPC to the second row of ad placements within search results, which was previously only available to CPA. So it's still early in our CPC development. We're excited about these innovations.”
What's the return?
Iannone outlined the business model behind advertising at eBay. It’s a variable model, in which sellers can set their rates.
“We're seeing really good ROAS for our sellers. So when we look at the return on ad spend that they're seeing, once they start using our ad products, their sales are basically seeing a double-digit increase. And more importantly, when you look at the ROAS that they can get on eBay, it's very attractive relative to industry standards,” Iannone said.
eBay will continue to build new products for advertising, as well as reporting tools.
“We feel like we're doing a nice job of balancing the buying experience and keeping that incredibly healthy and strong conversion while continuing to drive our ads business. And finally, we're just making the product easier to use,” Iannone said.
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Trending in Retail Media
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.